14 Smart And Practical Ways To Simplify The Due Diligence Process
Post Written By Expert Panel, Forbes Business Council
Smart business owners know the importance of practicing due diligence before signing any contract, whether you’re acquiring a company or hiring a new vendor. To ensure that you understand the ramifications of the agreement (and that you don’t find yourself in a suboptimal situation), you must conduct the appropriate research. However, due diligence can be a lengthy and complicated process, and you may not always be able to devote the necessary time to it.
Luckily, there are several ways you can make the quality-checking process easier. Below, members of Forbes Business Council share 14 practical and specific ways you can simplify due diligence.
1. Assess Things Upfront
Systems infrastructure, integration and the interfaces of core systems that support the business model are always a surprise after the fact. A good assessment of people, processes and technology upfront will simplify due diligence and add more value while avoiding bad surprises after the fact that will cost money. – Vanesa Patino, Valley Forge Fabrics
2. Speak With ‘Off The List’ References
Take time to find and speak with “off the list” references early in the process. Use your network to find unfiltered anecdotes on the people within and those who have done business with the target. Due diligence is more than just the financials and legal, though they’re important too. Can you work with this organization based on what you heard? Doing this first can save you expenses and headaches if the answer is no. – Amanda Parness, Spring Advisory Services
3. Ask For A Product Demo
In our industry, terms like attribution, media mix modeling and incrementality can be confusing or raise past anxiety. We encourage prospects to avoid getting lost in the jargon and see a demo to map features to their business goals and requirements instead. We also recommend asking for a candid opinion from trusted industry peers with experience using the solution in a similar use case. – Trevor Testwuide, Measured
4. Delegate The Process
As many may be aware, one of the best ways to burn yourself out is by trying to run every aspect of your business alone. My solution to this is to identify leaders in your team who are consistently producing results and can do quality checking for you. This is important, especially now that teams are remote. – Jeff J Hunter, BrandedMedia.io
5. Conduct LinkedIn Research
I use LinkedIn for due diligence and look for overlapping connections or other clients. Feedback from people I know who have worked with a product or service tends to be more useful than anything I can find on the web or in a database. – Ted Chan, CareDash
6. Get A Fresh Pair Of Eyes
We always incorporate a fresh pair of eyes for reviewing our clients’ work before it goes out. The original writer or respondent will sometimes miss something. Everyone is human, but having someone new look at the content fresh makes all the difference in catching even the smallest of errors! – Maurice Harary, The Bid Lab
7. Make Monitoring A Habit
Due diligence doesn’t end when you’re given the go-ahead to procure, so the best way to simplify it for yourself and your vendor is by making monitoring a habit. Oversight should be woven into your regular activities, and document collection, assessment and approval can be streamlined and automated processes. When it comes time to check in with your vendor, all you have to do is check them off your list. – Mori Kabiri, Counself Inc.
8. Run A Public Records Search
Due diligence is imperative when undertaking any deal. However, being accurate and thorough should not come at the cost of efficiency and practicality. You can always run a detailed public records search to ensure there are no unforeseen dangers. These searches are generally inexpensive and give you a great starting point. They also provide great discussion points when dealing with the other side. – Ismail Amin, TALG | The Amin Law Group, Ltd.
9. Prioritize Your Questions
Starting with factors that are must-haves for your decision, prioritize your questions. A laundry list of diligence questions may be required for a full conviction, but start with the handful of questions that a thesis is dependent upon. If one of those questions doesn’t yield a satisfactory answer, you will save all parties time, money and emotional investment by moving on quickly! – Missy Narula, Exhale Parent
10. Look Beyond The Cash Flow
Instead of just looking at a company’s cash flow, take a look at the bigger picture. Find out whether the market is healthy, what kind of demand there is for the company’s products and whether there are any new competitors in the industry and niche. Working with a data company is excellent for verifying corporate formation data which gives you one search across all secretary of state company directories. – Dimitri Akhrin, CRMDialer
11. Read Reviews
Reading reviews is a fast determinate of others’ experience and a simple way to start your due diligence. Reviews can indicate red flags that direct your attention to areas of concern where a deeper analysis may be necessary. It is always a quick first step to obtain varying opinions that provide a gamut of criteria to base a decision on. Reviews also trigger ideas that I hadn’t thought to research. – Jennifer Coy, Beauty Care Choices
12. Rely On Cloud-Based Solutions
To simplify due diligence and enhance quality checking, use cloud-based solutions. The first step is the creation of a secure virtual room that holds all sensitive information and documents. The next step is to use cloud software to automate due diligence tasks. The recognition of key risk items is automated by applying information structures and interpretation to documents in your virtual room. – Chastity Heyward, Sylvan Learning Center
13. Conduct A SWOT Analysis
A SWOT (strengths, weaknesses, opportunities and threats) analysis aids in simplifying audits on quality and risk control through direct scanning. There doesn’t exist a more logical, less guessing way to enhance easier and swifter checking. Strength, weakness, opportunity and threat are the essential themes of due diligence financially and juridically speaking, so a SWOT analysis is the best tool to use to quickly rationalize the circumstances. – Giovambattista Scuticchio Foderaro, VR CORPORATENEXT
14. Plan Ahead With A Clearly Structured Process
Due diligences involve analyzing a tremendous amount of information in a short period of time. Advance planning with a clearly structured process and transparency into the information needs from the seller results in a smoother process for both parties. Analyze as much information as available, close any gaps through seller stakeholder interviews and validate against benchmarks. – Sindhu Kutty, Kuroshio Consulting